Micro Economics & Macro Economics
Q1 The COVID-19 pandemic of 2020 caused significant disruptions to international business operations because numerous firms relied on suppliers from different nations, notably China. Many companies used lean production method and kept low inventories in order to cut costs. However, this made them susceptible to supply chain interruptions. For instance, worldwide supply lines for electronics, including parts for laptops and cell phones, were impacted when lockdowns forced Chinese facilities to close. The fact that a large portion of auto parts were made in China presented difficulties for auto makers as well, resulting in major global production halts.
What impact would the COVID-19 worldwide lockdowns have on Europe’s supply curves for consumer electronics and auto factories? Explain your observations about the aforementioned scenario, emphasizing the supply side and the shift in the supply curve.(Note : You can make assumptions as per the requirement of the case)
Ans :
Introduction
The COVID-19 epidemic has changed the global economy, affecting many industries, especially those that rely on foreign supply networks. As governments imposed lockdowns to prevent the virus from spreading, businesses faced unprecedented hurdles in procuring supplies and components for production.
Concept & Application
The supply curve in economics depicts the relationship between a good’s price and the quantity that producers are willing to supply. It usually slopes higher, showing that producers are eager to supply more of the commodity as prices rise. However, production costs, technology, and external shocks such as pandemics can all cause the supply curve to alter.
Conclusion
The COVID-19 pandemic has underscored the fragility of global supply chains, particularly for industries reliant on international sourcing, such as consumer electronics and automotive manufacturing.
Q2 (A) The London “black cab” taxis are amongst some of the expensive in the world. They complete to some extent with minicabs, which tend to be cheaper. However, minicabs are not allowed to pick up customers off the street, they have to be booked in advance, and their drivers do not have to memorize a London street map. minicabs operate in a more competitive market and require less of the drivers. Black cab(licensed) cab drivers must pass a background check and medical test and pay fees over 200 pounds.
This may help to ensure that passengers are safe and drivers are accountable, but it also means that they have a monopoly on picking up people on the streets? Elaborate on the given market structure (Black cabs and Minicabs) and discuss the Implications for Markets with High Barriers to Entry.
Ans :
Introduction
The London taxi market shows how a regulated industry interacts with microeconomic and macroeconomic issues. The contrast between black cabs and minicabs reveals a distinct market structure characterized by significant entry hurdles for black cabs, resulting in a monopoly on street-hail services.
Concept & Application
London’s taxi market is divided into two categories: black cabs (licensed taxis) and minicabs. Black cabs have monopoly power since they have exclusive rights to pick up passengers on the street. This monopoly is strengthened by severe laws that compel drivers to complete arduous tests, background checks, and medical examinations, as well as pay high licensing fees.
Conclusion
The structure of the London taxi market, which is characterized by black cab monopoly power and competition from minicabs, demonstrates the influence of high entry barriers on market dynamics.
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